Joining a pension system would be mandatory from 2025

The Ministry of Economy and Finance (MEF), portfolio that presided over the Multisectoral Commission In charge of carrying out a technical evaluation of the pension system, it made public its proposal to create a new pension system. The initiative is structured around four pillars with the aim of expanding coverage to all Peruvians, as well as including the minimum pension, since today only the ONP contemplates it. The entity will receive opinions to refine the final text that will be presented to the Minister council for evaluation and approval.

“This reform will allow more Peruvians to access a retirement pension, more competition with new players that are added to administer pensions. The proposal is fiscally sustainable, they are limited costs that will allow a gradual transition towards an increase in the coverage of the pension system”, explained the head of the MEF, Alex Contreras.

multipillar system

Based on the principles of universality, solidarity and progressivity, the Executive proposes to create a new system of four pillars (see infographic). In the first place will be the non-contributory one financed by the State, which will cover the Pension 65 programs —with the exception that it will include people living in poverty and not just extreme poverty— and Contigo.

In the semi-contributory pillar, the financing will also come from the public coffers, with the objective that both the affiliates of the public and private system can reach a minimum pension, since today only the ONP has a base pension of S/500 with 20 years of contributions. In addition, parents who stopped contributing because they dedicated themselves to caring for their children would benefit.

In third place is the contributory pillar, in which the financing comes from the contributions of the affiliates. Here it is contemplated that all Peruvians upon fulfilling the coming of age They will be affiliated to the pension system of their choice. This provision would come into force in January 2025. Service lessors, as well as independent workers in the private sector, will be required to contribute to their retirements.

While the fourth modality, which is voluntary, will be transversal to the entire system. This means that all citizens will be able to make contributions to improve their pensions. Those who are in an AFP will be able to dispose of this money in the future, that is, it will work as endless pension savings.

A few hours after seeing the light, the document is already being analyzed by experts in social security issues. Such is the case of the economist javier oliverawho opined that the initiative “denotes weakness.”

“Affiliates can go back and forth between both systems. This is going to cost a lot because minimum and proportional pensions will be given without solidarity financing,” Olivera criticized.

Three reform proposals

With the Executive document and the opinions of the Congress of the Republic, there are already three proposals to reform the current pension system, which, according to specialists, does not meet its objective as it is limited and exclusive.

Of the Legislative initiatives, one made space on the Plenary’s agenda, but with maneuvers that were questioned. This is the proposal of the Economy Committee, chaired by rosangella barbaran (Popular Force), which, according to specialists and unions that represent retirees, seeks to discard the ONP so that the AFP has more affiliates, that is, more clients.

In view of the complaints, the Magisterial Block withdrew its signature from the exoneration of the opinion of the Labor Commission, with which it will no longer be possible to vote in the current legislature that ends this Friday.

keys

Progressiveness. Access to the minimum pension would be gradual. In the first five years of validity, some 125,000 Peruvians could benefitwith a fiscal cost of S/200 million per year on average.

OECD. The proposal accepts the recommendations of the OECD in view of the accession process of Peru to this bloc, according to the MEF.

More AFP investment abroad

through the P.L. 1486/2021-CRscheduled in the plenary session of Congress, the Economy Commission proposes to increase the limit of AFP investments abroad from 50% to 80%.

The initiative once again responds to the interests of private administrators, warned congresswoman Sigrid Bazán, considering that the profitability of users has been lost in recent months, and that the AFPs have continued to win.

In addition, the proposal did not receive the approval of the Central Reserve Bank (BCRP), since “it would not be appropriate” to raise the fence considering the volatility and uncertainty of the exchange market.

The MEF, for its part, considers that there is no need to extend the investment limit abroad.